homework chapter 3

homework chapter 3 - 6.1 The information you have obtained...

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6.1 The information you have obtained suggests potential problems relating to one or more elements of Go-Go’s internal environment. Identify the problems and explain them in relation to the internal environment concepts discussed in this chapter. a. When complying with SOX, SOX requires the CEO and CFO to certify that all financial statements and disclosures are correct and represented correctly. They also certify that they are solely responsible for the internal controls of the company. Sox also require all publicly held companies and their auditors, requires audit committee members to be on the company’s board of directors and be independent of the company. That is not the case at Go-Go Corporation. The audit committee is responsible for overseeing the corporation’s internal control structure, its financial reporting process, and its compliance with related laws, regulations, and standards. The committee works closely with the corporation’s external and internal auditors. b. The treasurer was convicted of fraud a few years ago; however you do not know the specifics of what happened. However because you know this treasurer is unethical you will need to thoroughly examine the corporation's personnel policies and practices. c. This is an indication that there might be possible fraud through the company not just committed by an individual. This company is willing to strong arm an internal auditor that does set off red flags. d. The internal auditors should be organizationally independent of the accounting and finance functions. Internal audit could report directly to the audit committee of the board of directors and not the financial vice president e. A third party will need to be hired, an outside person that has no ties to family members and or friends. The dominance of an organization's management indicates a problem with the internal environment. It is very possible for this small group to override the internal control system. f. This indicates a possible problem with management's methods of monitoring performance. Subjective evaluation methods may not be as effective in detecting problems or in identifying good performance as objective measures that have been communicated to employees. External auditors will need to be hired to monitor the management’s performance and the overall operation of the company’s finances. g. This condition increases concern about the management’s operating style. This is a SOX requirement. h.
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This note was uploaded on 02/03/2012 for the course ACC564 ACC564 taught by Professor Smith during the Spring '11 term at Strayer.

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homework chapter 3 - 6.1 The information you have obtained...

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